HOTEL INDUSTRY IN INDIA

Presented by -
Dynanesh Rajeshirke
Vishal Patil
Rahul Sambhavit
Pradeep Mhaskar
 INDIA’S HOTEL INDUSTRY

India's hotel industry is experiencing an unprecedented boom, driven

by increasing numbers of business and tourist arrivals.
 Business and investments: Current situation
of India’s hotels
Some figures :
 Hotel Imperial New Delhi: 99.57 % occupancy. Hotel Trident
Hilton,Gurgaon (suburban Delhi): 98.3 % occupancy. Indian hotels are
witnessing mindblowing occupancy rates.

 Increase in average room rent for the entire hotel industry over the
last year: 35 %.

 Unmet demand for hotel rooms: 150 000 rooms. Additional demand
this year: 15 000 rooms.

 The boom has attracted several global players, ranging from Starwood
and Mariott to Four Seasons and ShangriLa. The largest hotel
company in the world,French chain Accor, has entered India and is
now devising aggressive plans for expansion in the market. Several
others are racing to increase their presence in India, including the
Marriott group.
 A booming market
The established hotel chains

 A number of global players are already well

established in India. These include Hilton,
Shangri-La, Radisson, Mariott, Meridien,
Sheraton, Hyatt, Holiday Inn, InterContinental
and Crowne Plaza.

Investments

 Now besides hotel companies, even the

investment firms and private equity companies
are beginning to get excited about India.
Berggruen Holdings India, a subsidiary of New
York-based investment company Berggruen
Holdings,has announced that it is seed-funding
a non-luxury hotel chain in India.
 Private equity firm Warburg Pincus has picked
up around 27 % stake in Delhi-based mid-price
hotel chain,Lemon Tree, for $ 60.2 million.
 The engine of growth

Tourist boom
 The tourism traffic has been growing between
20-28 % every year for the last four years and this
rate of growth is expected to continue for the next
few years.

 The constant boom and the resultant demand-

supply mismatch has led to sharp increases in the
average room rates and thus pushing up revenues
of industry players (hotels, tour operators,
airlines, shipping lines, etc)

 The tourism sector is expected to perform very

well in futureand the industry offers an
interesting investment opportunity for long-term
investors.

 Most of the five-star hotels are seeing more than

80 % occupancy and some of the lesser-known
five-star hotels are overbooked.
 Incredible India
 The Ministry of Tourism is pushing the
great Indian story effectively with its
subtle and charming “Incredible India”
campaign

 “We have spent $5 million on this

campaign since December 2002 and plan
to keep it going,” Amitabh Kant, the joint
secretary at India’s Ministry of Tourism.

 According to estimates, another 150,000

rooms will have to be added across the
country in the next five to seven years to
be able to meet the increased demand.

 At 6,762 rupees, Bangalore had the

highest ARR across all categories in the
30 cities. New Delhi was the second
highest, registering an ARR of 5,498
rupees. All India ARR increased 26.9 %
over the previous year. Star category
occupancies ranged from 46.3 % to
72.1 %.
 The future growth
 Hospitality experts believe that the Indian hotel industry will witness higher than usual
growth in the coming peak season. The good times for the Indian hospitality industry
are here to stay, with top-end hotels experiencing high room occupancy rates even in
the lean season.

 “ The lean season has been exceptionally good for us. Our room occupancy rate has
been around 89 per cent and we are looking at over 95 per cent occupancy for the
period September to December,” says Kapil Chopra, general manager, Trident Hilton,
Gurgaon.

 There was an increase of 15 % in the number of international tourist arrivals in India

and 14 % in the foreign exchange earnings in the first quarter of 2006 as compared to
the same period last year.

 The non-luxury segment in particular has been perking up with more and more investors
spotting the demand supply imbalance, surge in domestic travel and growth in spending
among middle-class Indians.
 The Competition
The world's leading hotel brands -
joining the battle

 The country has been flooded by some of the

world's leading hotel brands. New brands
such as Amanda, Satinwoods, Banana Tree,
Hampton Inns, Scandium By Hilt and
Mandarin Oriental are planning to enter the
Indian hospitality industry in joint ventures
with domestic hotel majors.

 Unitech, which is setting up two hotels in

Delhi,has already formed a joint venture with
Marriott International to run its three new
hotels in India, which are expected to start
operations by 2008. “The three new hotels
will be located in Kolkata, Gurgaon and
Noida. We are investing around 700 crore
rupees to set up these hotels,” says Unitech
managing director Sanjay Chandra.

 All other majors including Marriott, Hyatt,

Hilton, Accor, Four Seasons etc are briskly
reinforcing their presence in India.
 Looking for new niche
 Many business hotels in India are
integrating full-fledged spas on their
premises, originally a main stay of resort
properties.

 Another interesting trend in India is that of

mixed-use developments. While the
concept has proved to be successful
abroad, it is still at the embryonic stage in
India. In this type of development, the real
estate would typically include an apartment
block or a commercial block (retail or
office) along with a hotel.

 However, in order to attract more visitors,

India still needs to dramatically increase
the number of rooms available.
 The challenges to face
 The lack of adequate infrastructure
development. The airports at the primary
gateway cities of Delhi and Mumbai have been
privatised, and work has commenced on
modernisation. New privately owned international
airports are expected to be commissioned at
Hyderabad (2008) and Bangalore (2009), which will
give a large boost to the economic growth of these
areas.

 There is still need to improve air

connectivity; rail and road connections as well as
general infrastructure like power and water.

 The result of the industry's success. As

competition increases, there is a definite
pressure on ARR and operating margins. The
industry market will definitely shift from being
demand-driven to supply-driven and that the hotel
companies will need to revisit their strategies and,
of course, their prices.

 Some players are already preparing for the

difficult times when the ARRs are expected
to fall by 30-40 percent in the next 3-4 years
and then the distinguishing factor for the hotels will
be the offer in its entirety rather than just the price
or the facilities that the hotels offer.
 Lesson Objectives
 Define what is a Hotel Feasibility Study
 Describe the two phases of a Hotel
Feasibility Study
 Describe the three major components of
a Hotel Feasibility Study
 What is a Feasibility Study?
 Investigates the need for the proposed
hotel must be investigated, estimated,
documented and supported, so that the
client can be assured that the proposal is
justified.
 Feasibility Studies
 Hotel feasibility entails three major
components
(1) Preparation of a market feasibility study
for the project
(2) Estimation of costs for all elements of
the project and
(3) Determination of sources of financing.
Two Phases of a Hotel Feasibility Study
 Market Feasibility
 Economic Feasibility
 Site Selection
 Proximity
 Business and Trade Centers, Highways, Traffic
Levels, Key Attractions, Shopping Centers,
Population Backup
 Site Specific
 Size, Zoning Laws, height restrictions and
parking requirements, Visibility, Accessibility
Why Location & Size are important
Projected Demand Breakdown
Projected Market Support
 COST OF PROJECT

Total Building Cost RS 4,700(Cr)

Total Non-building Costs RS 1,600(Cr)

Total Soft Costs RS 850(Cr)

Land Cost RS 1,600(Cr)

Estimated Total Project Cost RS 8,750(Cr)

 Project 2 Franchise
 The project is a franchise, total cost and fee
structure to be clear.
 The Le Meridien Group of Hotels has played an
instrumental role in playing the perfect host to the
millions of tourists and guests coming here. It is a
luxury brand of great fame and reflects the inherent
Le Meridien touch of elegance and class through all
its properties in India. It is no wonder one of the
exclusive hotel chains of India.
BLUE PRINT OF HOTEL